FTC Not Sure How to Enforce Blogger Disclosure Rules

The Federal Trade Commission is still trying to define how it will enforce new disclosure guidelines for bloggers who may have received free products from the companies they cover, according to northeast regional director Leonard Gordon.

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The Federal Trade Commission building in Washington, D.C.

“If the consumer wouldn’t understand that the endorser, whether it’s a celebrity or a mommy blogger, is being paid…to talk about the product, that’s something that we’re concerned about, because we think consumers are being mislead,” said Mr. Gordon in a panel discussion on Thursday.

He said the blogosphere “went a little crazy with visions of storm troopers taking down suburban houses and seizing the computers of mommy bloggers,” but that the FTC has no plans to enforce the rules so aggressively.

Instead, he said, the agency wants to focus on people who are being paid to make plugs for products in “non-traditional contexts” such as tweeting. In particular, they’ll go after companies that make claims that aren’t true or can’t be substantiated, essentially the same mission of the FTC in holding companies accountable offline.

While the FTC is still deciding how the new blogger guidelines will be enforced, it’s concerned that consumers may not have sharpened the same sense of skepticism for online claims that they’ve developed for sources offline.

But the line for whether or not disclosure is necessary will likely be drawn in cases where consumers have a “reasonable expectation” that the author was not being paid to plug a product. “If the consumer knew that the person who was making that endorsement was being paid, would the consumer view that endorsement differently? I think that’s the bottom that we’re trying to get at,” said Mr. Gordon.

Also, in response to recent New York Times coverage about the FTC’s potential move from an “opt out” policy for online behavioral targeting toward an “opt in” strategy, Mr. Gordon said the FTC is still crafting its next move.

While companies that engage in targeted advertising based on customers’ online habits are currently required to disclose what’s being done with the data they provide, Mr. Gordon said that studies show that most consumers don’t read privacy agreements, and many companies aren’t accurately disclosing where consumer data is going.

For example, retailer Sears recently settled with the FTC after it had offered customers $10 in exchange for installation of behavioral tracking software on their computers. The software was meant to monitor online browsing habits, but it also ended up tracking potentially sensitive information such as financial records and prescription drug orders, which the FTC said Sears hadn’t adequately disclosed.

He said the FTC might require such Internet companies to instead provide an “opt in” form, which could be equivalent to a standardized nutrition label that clearly warns consumers about behavioral targeting before it happens.

The FTC might also change some of its terminology when it comes to defining behavioral targeting. “What the commission is wrestling with now is whether harm should be defined more broadly,” said Mr. Gordon. While the FTC does not want to “kill the golden goose” of Internet commerce, he said, companies need to be more transparent about what they’re doing with consumer data.

“Consumers hopefully are a little bit skeptical of what they see in advertising,” Mr. Gordon said. “But if consumers aren’t using that healthy skepticism in looking at these things, then that’s a concern to us.”